What the New Battery Chemistry for Tesla Inc. (NASDAQ: TSLA) Model Y, Model 3 Means

Electric vehicles have one core aspect that makes them extremely superior to combustion engine vehicles: they produce zero emissions at the tailpipe. By eliminating combustion engines and the fossil fuels that power those engines in exchange for rechargeable battery packs, automakers can reduce vehicle emissions by a significant margin. With a large portion of the world looking to cut down greenhouse gas emissions in a bid to arrest runaway climate change, EVs represent the next logical evolution of vehicular transport. However, EV technology is still relatively new, and players in the EV and battery-making spaces are constantly tweaking their formulas and designs to create more energy-dense EV batteries and energy-efficient electric cars.

That’s what makes a recent announcement by California-based EV startup Tesla Inc. (NASDAQ: TSLA) so interesting. In late August, the EV pioneer announced that it was offering an alternate version of the Model 3 Standard Range+ that would allow customers who had preordered the EV to get it sooner. By incorporating new battery chemistry into the Model 3 cars, Tesla could deliver the vehicles earlier at the same sticker price but with 10 miles less range. This would give the less expensive Model 3 cars an estimated EPA range of 253 miles compared to the standard 263-mile range.

Before Tesla unveiled this technology, every Model 3 and Model Y Tesla sold in North America relied on battery packs consisting of thousands of small nickel-cobalt-aluminum (“NCA”) cylindrical cells built in the Nevada Gigafactory. On the other hand, the newly unveiled lithium-iron-phosphate (“LiFP”) battery chemistry uses prismatic battery cells, not cylindrical ones. Prismatic battery cells tend to be contained in slim rectangular cans where the electrodes are either stacked or form in a flattened spiral.

While this technology may be new in the American market, the Chinese market is filled with EVs equipped with prismatic battery cells. For instance, all of the standard range Tesla models manufactured at Tesla’s Shanghai factory use prismatic battery cells. The technology is also installed on lower-range Tesla models built at the Shanghai facility for export to Europe. Tesla CEO Elon Musk first talked about using LiFP battery chemistry in lower-cost Teslas as the California-based startup works to reduce its reliance on expensive cobalt and introduce nickel into its battery chemistries.

Compared to NCA battery cells, LiFP cells are less energy dense but can be charged to up to 100% of their usable capacity. Analysts suggest that as the nascent EV sector matures and battery chemistries become more energy dense, manufacturers will use LiFP chemistries in lower-range models and the more expensive cobalt chemistries in higher-priced, higher-range electric cars.

As the technologies used in the electric vehicle industry evolve, the balance of power between various sector players such as Fisker Inc. (NYSE: FSR) is likely to keep changing until some actors cement themselves as runaway leaders.

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